MFT - Mainfreight

[Shareguy]

Craig's say

DSV was up 4% overnight after reporting its Q1 results. Volumes were soft with DSV commenting on lower market activity resulting in revenue that missed market estimates. However, margins were stronger which they partly attributed to more LCL volumes in the network, and also some head-count reductions, so overall EBIT was ahead of the market. Going forward they expect some improvement in volumes. MFT reports their FY23 result next month and while we are not likely to see material head-count reductions, we could see a similar trend of weaker volumes offset by good margins driven by a higher proportion of LCL volumes

[Shareguy]

Craig's overnight

MFT/FRE - Maersk – reported their Q1 last night. The result was ahead of expectations, but it confirmed a continuation of the volume and freight price declines seen in the last half of 2022. Sea freight volumes were down 9% and sea freight rates down 37%. The volume declines were largely driven by destocking (particularly retail, lifestyle, and tech goods), and while Maersk expects this to stabilise by mid-year, they were less certain around the outlook for consumer demand in 2H. Retail sales growth in Europe was negative in January and February, and US road freight demand has been mixed but with a downward trend since the September peak. MFT's trading update in early February was most notable for the decline in Air & Ocean revenue which appeared to be price rather than volume driven, and a weaker performance from the US transport operations. Based on the Maersk Q1 commentary we would expect trading for MFT since February has remained challenging with a more subdued short-term outlook.     

[Sideshow Bob]

Maersk and other major shipping companies have been raping and pillaging over the last couple of years, so good to see their rates come down significantly.

Hapag Lloyd for example just announced a dividend of €67 per share, a total of €11.1B, which was 65% of their profits.....Wiki has them 5th biggest and less than half the size of Maersk.

As for Air & Ocean, presumably with decreasing rates their revenue will decrease (if they work on a % margin).

[Shareguy]

Craig's today said

Ahead of MFT's result on 25 May, Wade Gardiner has reviewed , in detail, the likely earnings trajectory for the business over the next 18 months. This is partly based on recent reporting from global peers (Chart 1) with the majority reporting a deterioration in Air & Ocean (A&O) operating performance in the December & March quarters as pandemic-related supply chain congestion eases and the heat comes out of Global Freight Rates (Chart 2).
It's important to remember that MFT have already provided a trading update in early February (for 43 weeks) hence the FY23 result essentially covers the remaining 9 weeks of FY23 to 31 March, coupled no doubt with some insight on trading post balance date to early May.
Gardiner has taken a fine scalpel to his FY23 estimates (PBT -1.3% to $589m, consensus $596m) reflecting FX and a slightly weaker A&O run-rate. However, the cut is deeper in FY24 with his PBT lowered to $483m (-9.5%, consensus $534m), this reflects both the expected A&O trajectory (Chart 4) and a revision of Transport forecasts with a more normalised seasonal softness in 1H24 that was not apparent in 1H23 which may partly be attributable to a "COVID-bump" (Chart 3). Gardiner is of the view that a weaker outlook statement may accompany the result later this month given the softer anticipated operating trends in 1H24 as MFT laps its 1H23 numbers....with earnings momentum starting to return from 2H24.
Despite the lack of near-term earnings momentum Gardiner retains the Overweight recommendation for MFT on valuation grounds i.e., its largely in the price. His revised Target Price is $85.20 (last at $71.49) which is based on a 50:50 weighting of his long-term DCF valuation ($90.10) and shorter-term international peer PE multiples (21.6x = $80.30). MFT is currently trading on a rolling 1 Year Fwd. PE of 20.7x.
Hence, despite expectations for a more subdued outlook we are not expecting a significant pull back in the stock with the share price likely to tread water until earnings momentum returns sometime in 2H24.

[BlackPeter]

Craig's today said

Ahead of MFT's result on 25 May, Wade Gardiner has reviewed , in detail, the likely earnings trajectory for the business over the next 18 months. This is partly based on recent reporting from global peers (Chart 1) with the majority reporting a deterioration in Air & Ocean (A&O) operating performance in the December & March quarters as pandemic-related supply chain congestion eases and the heat comes out of Global Freight Rates (Chart 2).
It's important to remember that MFT have already provided a trading update in early February (for 43 weeks) hence the FY23 result essentially covers the remaining 9 weeks of FY23 to 31 March, coupled no doubt with some insight on trading post balance date to early May.
Gardiner has taken a fine scalpel to his FY23 estimates (PBT -1.3% to $589m, consensus $596m) reflecting FX and a slightly weaker A&O run-rate. However, the cut is deeper in FY24 with his PBT lowered to $483m (-9.5%, consensus $534m), this reflects both the expected A&O trajectory (Chart 4) and a revision of Transport forecasts with a more normalised seasonal softness in 1H24 that was not apparent in 1H23 which may partly be attributable to a "COVID-bump" (Chart 3). Gardiner is of the view that a weaker outlook statement may accompany the result later this month given the softer anticipated operating trends in 1H24 as MFT laps its 1H23 numbers....with earnings momentum starting to return from 2H24.
Despite the lack of near-term earnings momentum Gardiner retains the Overweight recommendation for MFT on valuation grounds i.e., its largely in the price. His revised Target Price is $85.20 (last at $71.49) which is based on a 50:50 weighting of his long-term DCF valuation ($90.10) and shorter-term international peer PE multiples (21.6x = $80.30). MFT is currently trading on a rolling 1 Year Fwd. PE of 20.7x.
Hence, despite expectations for a more subdued outlook we are not expecting a significant pull back in the stock with the share price likely to tread water until earnings momentum returns sometime in 2H24.

Given that nobody is able to say what next months or quarters oil prices will be ... and how deep the coming recession (if any) will be, I find it quite amazing if people operate in their forecasts with tenths of a percentage changes.

Apart from that - I think more analysts than not expect a somewhat tame recession to come, and we know that well run freight companies always do well at the end of recessions (which is related to business activities picking up and fuel still cheap).

MFT is a well run freight company, i.e. without further ado, I agree it sounds like a good idea to have some of them in ones portfolio.

I do.

[Left Field]

Can't beat quality....

https://www.nzx.com/announcements/412006

Result Summary:
Revenue $5.68 billion Up $457 million or 8.8%
Profit before tax $587.4 million Up $98 million or 20.0%
Net profit $426.5 million Up $71 million or 20.0%

• Adjusted for foreign exchange impact, Group revenue is up 4.2%, and profit before tax is up 14.9%.
• Second six-month period, whilst behind year prior, our third strongest six months ever. Profit Before Tax NZ$286 million versus NZ$307 million.
• Profit Before Tax growth over the last three years:
2021 NZ$262 million; 2022 NZ$489 million; 2023 NZ$587 million.
• Operating cash flow improved from $504 million to $757 million.
• A final dividend of 87.0 cents per share has been authorised by the Board of Directors, payable on 21 July 2023.

[Swala]

Another excellent result. Happy holder!

[Shareguy]

Craig's said
Mainfreight – Rough Road Ahead.   The semi-annual pilgrimage to MFT's Head Office at Railway Lane in Otahuhu for its result briefing took a detour yesterday to MFT's impressive new Warehousing facility at Favona Road (pic of Don & Tim below), a GMT development. The result itself was no surprise with FY23 PBT of $587m broadly in line with market and all credit to MFT for absorbing c$10m in one-off costs in their Australian and American operations without feeling the need to "normalise" and take the costs below the line. As Wade Gardiner notes in a detailed overnight – MFT had already reported 43 weeks through to the end of January, so the result was all about trading in the last 9 weeks and the outlook for 1H24 (Charts 1,2 below). The result was softer at the top line across all 3 MFT divisions (Transport, Air & Ocean, Warehousing) relative to Wade's expectations and slightly weaker at the bottom-line bar the Transport contribution. From a geographic perspective America was the weaker performer reflecting a less mature operation than is now consolidating its leadership team in Chicago.
The Title to Wade's note ('Rough Road Ahead') signals the weaker outlook ahead of a potential trading update from MFT at its AGM on 27 July. MFT note deteriorating macroeconomic conditions, reducing freight volumes and higher inflation as the obvious headwinds with trading in the first 6 weeks seeing "weakness in volumes and activity" which is consistent with commentary from international peers of late.
The challenge for MFT in the current half (1H24) is not just the lapping of elevated Air & Ocean freight rates but also an extremely strong Transport performance that Wade partly attributes to a COVID bounce ... for these reasons Wade has MFT EPS declining 25% in 1H24 on PcP.
Despite the negative short-term earnings momentum Wade retains the Overweight recommendation on MFT with a revised TP of $86.65 (+1.7%) – the long-term story (and value) remains very much intact for MFT with the shares trading on an undemanding 20x PE and a 2.5% yield (40% pay out) supported by a fortress balance sheet (MFT is in a net cash position). There may be some share price weakness leading into the interim result (November) but with cyclicals back in vogue as interest rates peak globally bargain hunters may be disappointed

[BlackPeter]

Craig's said
Mainfreight – Rough Road Ahead.   The semi-annual pilgrimage to MFT's Head Office at Railway Lane in Otahuhu for its result briefing took a detour yesterday to MFT's impressive new Warehousing facility at Favona Road (pic of Don & Tim below), a GMT development. The result itself was no surprise with FY23 PBT of $587m broadly in line with market and all credit to MFT for absorbing c$10m in one-off costs in their Australian and American operations without feeling the need to "normalise" and take the costs below the line. As Wade Gardiner notes in a detailed overnight – MFT had already reported 43 weeks through to the end of January, so the result was all about trading in the last 9 weeks and the outlook for 1H24 (Charts 1,2 below). The result was softer at the top line across all 3 MFT divisions (Transport, Air & Ocean, Warehousing) relative to Wade's expectations and slightly weaker at the bottom-line bar the Transport contribution. From a geographic perspective America was the weaker performer reflecting a less mature operation than is now consolidating its leadership team in Chicago.
The Title to Wade's note ('Rough Road Ahead') signals the weaker outlook ahead of a potential trading update from MFT at its AGM on 27 July. MFT note deteriorating macroeconomic conditions, reducing freight volumes and higher inflation as the obvious headwinds with trading in the first 6 weeks seeing "weakness in volumes and activity" which is consistent with commentary from international peers of late.
The challenge for MFT in the current half (1H24) is not just the lapping of elevated Air & Ocean freight rates but also an extremely strong Transport performance that Wade partly attributes to a COVID bounce ... for these reasons Wade has MFT EPS declining 25% in 1H24 on PcP.
Despite the negative short-term earnings momentum Wade retains the Overweight recommendation on MFT with a revised TP of $86.65 (+1.7%) – the long-term story (and value) remains very much intact for MFT with the shares trading on an undemanding 20x PE and a 2.5% yield (40% pay out) supported by a fortress balance sheet (MFT is in a net cash position). There may be some share price weakness leading into the interim result (November) but with cyclicals back in vogue as interest rates peak globally bargain hunters may be disappointed

I like it when Craig's are pessimistic - probably means they are accumulating for their favourite clients ;

Anyway - market seem to be optimistic - MFT share passed this week the golden cross - lighting up my NZ portfolio (the European shares are already some time in the green zone :

But back to MFT: Technical indicators looking good (golden cross) ...

Fundamentals looking good as well (with a forward PE of 19 and a forward EPS CAGR of 14 - hey, this is a PEG of 1.34 - not too bad for such a large organisation.

Macroeconomic picture with more and more analysts talking about the real estate bottom reached and immigration rising looks good as well. More people need more stuff. Lots to do for the good trucks from Mainfreight.

I like it when the indicators are aligned and pointing upwards ... while Craigs talks the price down ;

[entrep]

I agree that Craigs are generally an excellent counter-indicator.

[kiwi2007]

Annual Report out tody - http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MFT/413696/397203.pdf

I've only just developed an interest in charting but tradingview seems to show a very interesting symmetrical triangle chart pattern has been developing over the last year. Difficult to suggest which way it's going to break out but it could  move around $15.00 either up or down when it does - according to https://blog.roboforex.com/blog/2019/08/29/triangle-and-wedge-patterns-in-technical-analysis/#Equilateral_or_Symmetrical_Triangle that is. Personally though can't see it going below $65.

Any more experienced chartists looked at this and can offer any comments?

[BlackPeter]

Annual Report out tody - http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/MFT/413696/397203.pdf

I've only just developed an interest in charting but tradingview seems to show a very interesting symmetrical triangle chart pattern has been developing over the last year. Difficult to suggest which way it's going to break out but it could  move around $15.00 either up or down when it does - according to https://blog.roboforex.com/blog/2019/08/29/triangle-and-wedge-patterns-in-technical-analysis/#Equilateral_or_Symmetrical_Triangle that is. Personally though can't see it going below $65.

Any more experienced chartists looked at this and can offer any comments?

Trust me - charting is so much easier and much more reliable with the benefit of hindsight ;

[Onemootpoint]

Seems like someone is selling MFT in bundles of 101 today at different prices.

[Shareguy]

Not a good quarter, down 43 percent (PBT). Then again market already pricing in a non covid result. NZ and Australia holding up better than other markets. $1.3 billion of property owned.

Might be a good buying opportunity.

[Onemootpoint]

Might be a good buying opportunity.

Could be; already dropped to below $70 after a short trading halt.